U.S. Oil & Gas Plc.
(“U.S. Oil” or the “Company”)
OPERATIONS UPDATE
Highlights:
- In preliminary testing, Eblana-3 well flowed light crude oil to the surface
- Six zones and subzones perforated and swabbed, zone 5 most promising.
- Loose volcanic ash and tuff believed repeatedly blocking zone 5 perforations and inhibiting flow
- Clearing zone 5 by extended pumping to commence
- AGM date to be announced shortly
Ebana-3
During drilling operations at the Eblana-3 well in April 2018, multiple potential hydrocarbon-bearing zones were identified from cutting samples, mud logs, and processed wire-line logging data. After a review of all available data, six zones indicating a higher potential for hydrocarbons were selected for perforation.
Downhole operations, including perforating selected formations, were conducted between June 18 and June 30, 2018 using a workover rig, and continued between 12 August and 19 August after the granting of additional regulatory permissions.
Preliminary testing
The purpose of the preliminary testing was to determine which if any of the identified and perforated zones were suitable for production testing and to prepare the selected zone or zones by clearing formation debris. Possible formation damage would also be assessed and additional perforations carried out.
When the well was reopened on 22 August, light crude oil flowed to the surface. The well was subsequently shut in until the following day, when oil was again observed to flow. Samples were taken at the wellhead by the Company and by the Bureau of Land Management. After isolating the zones deemed most likely to have yielded the oil (zones 5 and 6), a jack pump was installed, but sustained pumping failed to produce a consistent flow. Five additional perforations (two reperforated) were carried out on Zones 1, 2 and 5 between October 10 and October 16, including three additional subzones in zone 5. On testing, zone 1 produced oily water and showed either low permeability or possibly a plugged formation. Zone 2 and zone 4A produced limited fluids. And while zone 3 showed high potential for hydrocarbons, only asphaltene and other heavy components were observed. Zone 5 was considered the most likely to produce commercial flow.
Three perforation zones were swabbed and tested in zone 5. Of these, the perforation zone containing a fault produced fluids strongly associated with hydrocarbon accumulations, flowing low pH formation water with dissolved hydrocarbons. It appears that the perforations may be being intermittently blocked by volcanic ash, with volcanic tuff occluding the flow of discrete hydrocarbons from the volcaniclastic matrix. Whether or not this is the case can be tested by extended pumping.
Current operations
Workover rig operations were terminated and the rig stood down on October 24. A jack pump was then set to pump monitored fluids for an extended period with the objective of clearing the zone 5 formation and allowing oil to flow. If the well flows, extended production testing will be carried out. If pumping fails to clear the formation but the data continues to support the belief that a viable reservoir is present and that local permeability is preventing commercial flow, then alternative methods will be examined, including hydraulic fracturing of the formation.
Additional acreage acquired
On the basis of the initially encouraging results from the Eblana-3 drill and the flowing of high quality oil to the surface, in June and July 2018 the Company bid for further Hot Creek Valley leases in auctions held by the Bureau of Land Management (BLM). The award of those leases has now been confirmed and the total acreage position of the Company is 73,725 acres. Based on gravity survey data, at least three large potential hydrocarbon-bearing structures exist within the new acreage. The total annual lease cost to the company of the additional lands is $78,070.
Given the strong oil shows, the data collected during the Eblana-3 drill, and the consensus amongst the technical team that a major oil system is present in Hot Creek Valley, the Board believes that the decision to acquire further leases was correct in the context.
AGM
The Company intends to hold its AGM as soon as possible. Shareholders will be advised of the details as soon as arrangements can be finalised. At the meeting, a detailed account of Eblana-3 operations will be given and the Board will present a plan for the next stage in the Company’s exploration of Hot Creek Valley, along with an outline of potential funding requirements.
Brian McDonnell, US Oil CEO said:
“High quality light oil has flowed to the surface from Eblana-3, and our preliminary testing has identified a highly promising and potentially productive zone. However, the nature of the Hot Creek Valley geology is posing challenges, and before any production testing can be carried out, we need to determine how best to deal with volcanic ash and tuff. At the forthcoming AGM, the Board will be presenting to shareholders a full account of how drilling and testing was conducted and an update regarding ongoing operations.”
FORWARD-LOOKING STATEMENTS
The statements in this communication reflect the current thinking of the Board and the Company’s present plans. The Company reserves the right to alter plans in the light of developing knowledge and circumstances. Shareholders’ attention is drawn to the note below concerning Forward-looking Statements.
This press release contains certain “forward-looking statements” and “forward-looking information”. Forward-looking statements and forward-looking information include, but are not limited to, statements with respect to: business plans and strategies of US Oil and Gas; operating or technical difficulties in connection with drilling or development activities; availability and costs associated with inputs and labour; drilling and exploration costs; the speculative nature of oil exploration and development; diminishing quantities or quality of reserves; synergies and financial impact of completed acquisitions; the benefits of the acquisitions and the development potential of properties of US Oil and Gas; the future price of oil; supply and demand for oil; the estimation of reserves; the realization of reserve estimates; costs of production and projections of costs; success of exploration activities; capital expenditure programs and the timing and method of financing thereof; the ability of US Oil and Gas to achieve drilling success consistent with management’s expectations; net present values of future net revenues from reserves; expected levels of royalty rates, operating costs, general and administrative costs, costs of services and other costs and expenses; expectations regarding the ability to raise capital and to add to reserves through acquisitions, assessments of the value of acquisitions and exploration and development programs; geological, technical, drilling and processing problems; treatment under governmental regulatory regimes and tax laws.
All statements other than statements of historical fact are forward-looking statements
THE DIRECTORS OF THE COMPANY ACCEPT RESPONSIBILITY FOR THE CONTENTS OF THIS ANNOUNCEMENT
Neither this announcement nor the information contained herein constitutes an offer or solicitation by U.S. Oil and Gas Plc for the purchase or sale of any securities nor does it constitute a solicitation to any person in any jurisdiction where solicitation would be unlawful.
For further information contact:
Brian McDonnell, Chief Executive Officer +353 (1) 631 9022
About U.S. Oil & Gas:
U.S. Oil & Gas plc is an oil and gas exploration company with a strategy to identify and acquire oil and gas assets in the early phase of the upstream life-cycle and mature them. The Company’s
main asset is in Nye County, Nevada where it holds the entire share capital of US-based company, Major Oil International LLC (“Major Oil”). Major Oil has acquired rights to exploration and development acreage in Hot Creek Valley, Nye County, adjacent to the oil and gas rich Railroad Valley area of Nevada, both of which are part of the Sevier Thrust of central Nevada and western Utah, USA.
For further information please refer to our website at: www.usoilandgas.us
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